IRS Jovem: what changes in 2024

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With the approval of the State Budget for 2024 (OE 2024), several legislative changes were introduced regarding taxes. In terms of the IRS Code, many of these changes were made with the aim of increasing disposable income in households. Some of them are specifically aimed at young people, namely by updating the IRS Jovem regime.


The IRS Jovem regime is not a new feature introduced by the 2024 State Budget, but it increases the tax benefits for young people who can qualify for this regime, by further reducing their contributions in the first years of activity.


What is the IRS Jovem?

The IRS Jovem regime is a tax benefit under IRS (Personal Income Tax) aimed at young people , as the name suggests, which was introduced in 2020 by Law No. 2/2020, of March 31.


This benefit consists of exempting from IRS taxation all or part of the hungary whatsapp number database income of category A (dependent work) or category B (independent work) earned by young workers, during the period of 5 years after completion of the study cycle.


Since its creation, the IRS Jovem has been sequentially updated: initially provided for in article 2.º-B of the IRS Code (CIRS), from the tax periods beginning on or after January 1, 2022, Law no. 12/2022, of June 27, repealed that article and the IRS Jovem came into force in article 12.º-B of the CIRS (“Exemption of income from categories A and B”).


The changes to the IRS Jovem meant that this benefit, which initially exempted 30% of income obtained in the first year from taxation and extended, regressively, for 3 years, now exempts all income in the first year and applies for 5 years, in addition to covering more young people.


Who does the IRS Jovem apply to?

Young people who earn income from IRS categories A or B are entitled to this benefit , in the first year of earning this income and in the following four years after completing their study cycle, whether continuous or interpolated, and who meet certain requirements, namely:

be between 18 and 26 years of age at the time of the option, unless the study cycle corresponds to level 8 of the National Qualifications Framework (QNQ), that is, the doctorate degree, in which case the age limit is extended to 30 years;

are not considered dependents;

have completed a cycle of studies equal to or higher than level 4 of the NQF ("secondary education obtained through dual certification pathways or secondary education aimed at pursuing higher education studies plus professional internship – minimum of 6 months");

have made this option in the income tax return Model 3.


This exemption may only be used once by the same taxpayer and provided that the option for the scheme is exercised up to the maximum age referred to above, namely 26 or 30 years. The years of exemption may be consecutive or interpolated, provided that the taxpayer does not exceed 35 years of age, inclusive.


IRS Jovem: what changes with the 2024 State Budget

As mentioned, the 2024 State Budget did not introduce the first changes to the IRS Jovem regime and those introduced do not change the functioning of the support itself.


With its entry into force, the exemption limits were increased both in terms of the percentage of exempt income in each year, and in terms of the maximum value for the eligible income itself, defined based on the value of the Social Support Index (IAS).


Comparing, in relation to the 2023 income, the exemption was:

50% of income in the first year, with a limit of €6,005.38 (12.5 times the IAS);

40% of income in the second year, with a limit of €4,804.30 (10 times the IAS);

30% of income in the third and fourth years, with a limit of €3,603.23 (7.5 times the IAS);

20% of income in the fifth year, with a limit of €2,402.15 (5 times the IAS).


For income earned in 2024, the exemption under the IRS Jovem is largely increased to:

100% of income in the first year, with a limit of €20,370.40 (40 times the IAS);

75% of income in the second year, with a limit of €15,277.80 (30 times the IAS);

50% of income in the third and fourth years, with a limit of €10,185.20 (20 times the IAS);

25% of income in the fifth year, with a limit of €5,092.60 (10 times the IAS).


This means that, in 2024, all income in the first year after the end of the study cycle will be exempt from IRS , instead of just half – only in the third and fourth years will half of the income be exempt. On the other hand, the income limit that can be exempt, in value, increases to more than three times as much in the first year and to a little more than double in the last year.


What the IRS Jovem update means for companies

Despite being a measure aimed at individuals, the changes to the IRS Jovem regime affect the processing of salaries by employers. Companies with employees in their service must take into account the withholding taxes made on their salaries, when informed of the possibility of their inclusion in the benefit.


As defined in paragraph 4 of article 99.º-F of the CIRS, entities must apply the withholding rate resulting from the withholding tax tables approved in that year to all income, including exempt income, only to the part of the income that is not exempt , depending on the year in question, after completion of a cycle of studies.


It should be noted that information about the possibility of benefiting from this scheme must be given to employers by the respective employee, before the first payment, upon proof of completion of a cycle of studies.